SAN FRANCISCO (KCBS)— The news of Facebook’s $19 billion cash and stock WhatsApp acquisition seems like an astonishing figure, but considering that they bought Instagram for $1 billion in 2012, I’d say it’s a brilliant move.
So they’ve bought it, but what exactly is it? While Americans may not know it, the text-messaging app is very popular globally with 450 million users. According to Facebook, 70 percent of them use it daily.
Rather than using the phone company’s network (where you usually have to buy a bundled package) this app uses the Internet. As long as you have a data plan, there is no cost per message, so in a sense it’s free. The app is sophisticated enough that you can send audio and video as well.
It’s an interesting move because Facebook already has a messenger app built into it where you can log in and chat back and forth with Facebook friends. Essentially they didn’t acquire the technology, but rather they get the enormous amount of users.
It should be noted that WhatsApp founders pride themselves about not taking advertising. They don’t like the advertising model, whereas that’s the revenue model for Facebook. It remains to be seen if that shifts over time.
There had previously been headlines that WhatsApp had been challenging Facebook and that teens were leaving the more established site in droves and were joining smaller sites and start-ups. It’s like the old saying goes: if you can’t beat ‘em, join ‘em.
I don’t know that Facebook was in any real danger here, but they do understand that they need to go on an acquisition spree to remain relevant with younger people, even if these purchases may at first seem over-priced.